<span>In Defense of “What the Stock Market Can Teach Us About Private Equity”</span>
The study says listed private equity behaves like high octane public stock, not a diversifying alpha source. Over 20 years of annual data, the Finominal Private Equity Index shows beta near 1.6, alpha minus 2 to minus 6 percent, and $R^2$ around 88 to 91 percent. Data frequency flips results. Monthly cuts beta to 0.9 and quadruples noise. Biennial slashes noise to 3 percent. Diagnostics support CAPM. Index construction matters. Including 3i can skew results.
What it examines
The study responds to Brown and Volckmann by analyzing listed private equity (LPE) via the Finominal Private Equity Index. Using CAPM regressions of FPEI against MSCI World over 20 years, with annual/biennial versus monthly/daily returns, it tests beta, alpha, and R-squared, addressing thin-trading noise and excluding outlier 3i.
What it concludes
Results show high beta (~1.6), negative alpha (-2% to -6%), and high correlation, stronger and cleaner with annual data. LPE behaves like leveraged equities, not a diversifier. Applications: realistic benchmarking, portfolio risk sizing, fee awareness, index design. Limits: proxy-based, microcap issues. Future work: broader samples, robustness checks.
Evidence objects
Listed private equity trades like high-octane public equity: FPEIs 20-year annual data to June 30, 2025 show $\beta\approx1.6$, $\alpha$ 2% to 6% (not significant), and sustained market linkage $R^2\sim88$--$91%$, overall.
key_findings bullet 1 · key_findings · validation V0
Data frequency flips the story: monthly $\beta\approx0.9$, negative $\alpha$ vanishes, noise jumps to 40% versus 9% annually; daily pushes variance to 77%, biennial cuts it to 3%, exposing micro-cap distortions.
key_findings bullet 2 · key_findings · validation V0
Authors present CAPM using annual differencing and subperiod checks; diagnostics: $\beta$ CI 1.25--1.70, Dimson $\beta$ 1.3. Caveats: including 3i (Berkshire-like, $\beta\sim1.0$, ~0.6% costs) skews results; LPE proxy; $\alpha$ insignificant overall.
key_findings bullet 3 · key_findings · validation V0
Reassessing listed private equity, the papers novelty is a practitioner-focused case for annual differencing over monthly/overlapping regressions to curb microstructure noise in thinly traded micro-caps. Empirically, it documents stable high $\beta\approx1.6$, negative $\alpha$, and high $R^2$ versus global equities. Incremental yet compelling for PE--public market links and econometric specification issues.
key_findings bullet 4 · key_findings · validation V0
Raw abstract and provenance
They use sophisticated econometric methodology and come to the conclusion that the private equity closed-end funds that trade on the London Stock Exchange are
Source row: 1799 · abstract type: snippet